Rates are compounded annually that means that 1 usd a year, Financial Management

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Rates are compounded annually that means that 1 usd a year

Suppose that the spot rate of EUR is 1.1963 USD for 1 Euro. 1 year forward rate is 1.2210 USD for 1 Euro. Suppose that the 1 year USD interest rate is 1.70% annualized and Euro interest rate is 0.001% annualized. Rates are compounded annually that means that 1USD a year from now grows to 1*(1+1.70%) USD. Is there an arbitrage opportunity? If there is, describe it (what you borrow, what you invest etc.)

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Financial Management: Rates are compounded annually that means that 1 usd a year

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Financial Management: Rates are compounded annually that means that 1 usd a year

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